NFRA Flags Walker Chandiok & Co. LLP for Independence Failures and Non-Audit Service Violations: Key Findings from Inspection Report 2024

Overview of the NFRA Inspection

The National Financial Reporting Authority (NFRA) completed an audit quality inspection of M/s Walker Chandiok & Co. LLP (WCCL) covering FY 2023–24. This inspection — the firm's third consecutive cycle — was initiated in September 2025 and carried out on-site during December 2025. The exercise was conducted under the authority vested by Section 132 of the Companies Act 2013, which mandates NFRA to monitor compliance with auditing standards, oversee professional service quality, and recommend improvements.

The Inspection Report bearing No. 132.2-2024-06, dated March 27, 2026, identified serious and recurring deficiencies across two broad domains: (a) firm-wide quality control systems, with particular emphasis on independence, and (b) individual audit engagement file reviews covering five selected statutory audits for the financial year ending 31.03.2024.

Key concern: NFRA concluded that WCCL's continued functional alignment with the Grant Thornton International Limited (GTIL) network — despite the firm's persistent denial of formal membership — raises significant questions about its compliance with statutory independence requirements under the Companies Act 2013 and SQC 1.

Inspection Scope and Methodology

Firm Selection and Engagement Sample

WCCL was selected for inspection based on risk-based parameters including the volume, complexity, and diversity of audit engagements it undertakes. Five individual audit engagement files for the statutory audit of financial statements for the year ending 31.03.2024 were reviewed, covering the following focus areas for each engagement:

  1. Revenue Recognition
  2. Loans and Advances
  3. One engagement-specific risk-based area

The selected five engagements do not constitute a representative sample of WCCL's total audit portfolio for the year.

Inspection Process

  • Entry Meeting: 17.10.2025 at NFRA office
  • Engagement Walkthroughs: 28.10.2025 to 29.10.2025
  • On-site Inspection: 01.12.2025 to 05.12.2025
  • Draft Report Conveyed to Firm: 17.03.2026
  • Final Report Issued: 27.03.2026

The inspection covered governance framework adequacy, internal controls over audit quality, and audit risk identification mechanisms. Discussions were held with the firm's leadership team and the engagement teams for selected audits.

Part A: Firm-Wide Audit Quality Control — Key Findings

Independence of the Firm: The GTIL Network Question

Statutory Framework

NFRA's findings on independence are anchored in a well-established statutory and professional framework:

  • Section 141(3)(i) of the Companies Act 2013 — disqualifies any person from acting as statutory auditor if any associated entity (subsidiary, associate, or similar form) is engaged in providing services prohibited under Section 144.
  • Section 144 of the Companies Act 2013 — explicitly prohibits a statutory auditor from providing the following services, directly or indirectly, to the auditee company, its holding company, or subsidiary:
    • Accounting and bookkeeping services
    • Internal audit
    • Design and implementation of financial information systems
    • Actuarial services
    • Investment advisory services
    • Investment banking services
    • Outsourced financial services
    • Management services
    • Any other prescribed services

The Explanation to Section 144 extends the prohibition to services rendered through the auditor's parent, subsidiary, associate entity, or any entity over which the firm or its partner has significant influence or control, or whose brand name is used.

  • Para 6(k) of SQC 1 defines "Network" as a larger structure aimed at cooperation involving profit/cost-sharing, common ownership, control, management, quality control policies, business strategy, use of a common brand name, or significant sharing of professional resources.
  • Paras 18–27 of SQC 1 require firms to establish robust independence policies, evaluate threats, apply safeguards, and communicate requirements internally.

NFRA's Core Finding: WCCL Is Part of the GTIL Network

Despite WCCL's consistent denial of being part of the GTIL network — citing the absence of a formal membership agreement — NFRA reaffirmed its findings from the 2022 and 2023 inspection reports and strengthened them with fresh evidence gathered in the current cycle.

NFRA's observations establishing WCCL's de facto membership in the GTIL network include:

1. Use of GTIL's Proprietary Audit Technology:
WCCL uses the GTIL-developed audit platform 'Leap' (previously 'Voyager'), made available exclusively in India through GTAPL. The GTIL Global Transparency Report 2024 describes Leap as a "proprietary, cloud-based tool" developed as part of GTIL's "Global quality" strategy for member firms. The complete life cycle of audit procedures — from acceptance to archival — is conducted on this platform, embedding GTIL's policies directly into WCCL's workflow.

2. Adherence to GTIL's Key Assignment Acceptance (KAA) Policy:
NFRA observed 17 instances in FY 2023–24, 13 instances in FY 2024–25, and 4 instances in FY 2025–26 (up to the date of inspection) where WCCL sought and obtained approval from GTIL's global KAA Committee for client acceptance based on fee thresholds and brand-related criteria. This establishes GTIL's direct control over WCCL's business decisions.